Full text: Wirtschaft und Gesellschaft - 1996 Heft 3 (3)

Wirtschaft und Gesellschaft 22. Jahrgang (1996), Heft 3 
tax rate was reduced by one penny and, in spite of the difficult state of 
the public finances, voters were given reason to anticipate further eye­
catching reductions in the last pre-election Budget). 
The irony is that it was the two broken promises and the abandonment 
of thatcherite macro-economic policy that combined to bring about, 
however briefly, a "perfect" , an "economist's" cyclical recovery: domestic 
demand remairred low because of the squeeze on real incomes of consum­
ers and a ten billion pound reduction in public expenditure, while foreign 
demand expanded: leaving the ERM led to a " competitive devaluation" 
that at one point reached 23% agairrst the DM or 16% of the "effective" 
rate. Inflation was held back not only by world-wide processes but also 
by the downward pressure exerted by weak employment markets, the 
crash in hause prices, depressed consumer confidence and the high level 
of spare productive capacity and unsold and unsellable stocks: inflation 
which had been brought under control by the link with the DM/ERM, 
stayed low not because of the strength but of the weakness of the 
economy. The "economic" success of the early post-ERM years, while 
bringing high profits to business, did not filter through to the mass of 
individuals. Two data say it all: between 1991 and 1995 labour's shares of 
national income (business sector), declined by 4 .9  percentage points (91) :  
and since 1992 nearly nine million people have experienced at least one 
spell of unemployment (92). It was and remains a "joyless" recovery. 
The political consequence of this was that voters, " sore" and "disillu­
sioned by recession" which had been policy-made - were "outraged" by 
the broken promises and had lost not merely confidence in the pledges 
made by the Conservatives, but also in their competence in managing the 
economy (93), traditionally perhaps their most valuable political asset. 
Opinion polls showed the collapse of the government's popularity and 
in the partial local elections of 1993 the Conservatives lost control of all 
but one of the "shire councils" , the traditional bedrock of their support. 
Perhaps more important, they lost five hundred council seats, and as it is 
local councillors who provide the core of their activists in general elec­
tions also, this was a bitter blow. In the partial local elections of May 
1996,  the Conservatives suffered a further defeat: they lost more than 
half their seats. In summing up the situation, Stephens states that the 
favourable economic conjuncture "affered little political comfort to John 
Major" . The government never apologised for the ERM debäcle on Black 
Wednesday nor for the volte-face on taxation and "unsurprisingly, the 
voters chose not to assign to it the credit" for the improvement in the 
economy (94) . This must have belatedly dawned on the government be­
cause, in May 1996,  the Conservative Party launched a poster campaign 
which referred to the unpopularity of the effects of their economic policy 
with the slogan, "Yes it hurt, but yes it worked" . (They were harking 
back to a statement by a former Chancellor of the Exchequer who said of 
the government's economic policy, "If it isn't hurting, it isn't working") .  
Clearly the Tories wanted to  turn away wrath by confessing that they 
had caused pain and at the same time to be rewarded for not having flin-

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